Document Type
Discussion Paper
Publication Date
3-6-2025
CFDP Number
2338R3
CFDP Revision Date
03/06/2025
CFDP Pages
63
Journal of Economic Literature (JEL) Code(s)
D44, D47, D83, D84
Abstract
We analyze a nonlinear pricing model where the seller controls both product pricing (screening) and buyer information about their own values (persuasion).
We prove that the optimal mechanism always consists of finitely many signals and items, even with a continuum of buyer values. The seller optimally pools buyer values and reduces product variety to minimize informational rents.
We show that value pooling is optimal even for finite value distributions if their entropy exceeds a critical threshold. We also provide sufficient conditions under which the optimal menu restricts offering to a single item.
Recommended Citation
Bergemann, Dirk; Heumann, Tibor; and Morris, Stephen, "Screening with Persuasion" (2025). Cowles Foundation Discussion Papers. 2842.
https://elischolar.library.yale.edu/cowles-discussion-paper-series/2842
